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Unit information: Principles of Financial Intermediation in 2018/19

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Unit name Principles of Financial Intermediation
Unit code EFIMM0054
Credit points 15
Level of study M/7
Teaching block(s) Teaching Block 2 (weeks 13 - 24)
Unit director Professor. Klaus Schaeck
Open unit status Not open
Pre-requisites

None

Co-requisites

Specifically for students studying on the MSc in Economics and Finance - if taking this unit, you can not take:

EFIMM0006 - Banking OR

EFIMM0053 - Banking Regulation and Financial Stability OR

EFIMM0052 - Banking Management and Risk Management

School/department School of Accounting and Finance
Faculty Faculty of Social Sciences and Law

Description

This module covers 10 key themes in banking. It is based on seminal academic papers written on why banks exist, how banks create liquidity, the role of banks for economic growth, bank-borrower interaction, relationship lending, loan pricing, the role of international banking, industrial organization of banking systems, how regulation affects bank behaviour, and how bailouts affect structure and performance of banks and banking markets. The module illustrates the use of applied microeconometric techniques in the context of banking and therefore also benefits students in the choice and development of their dissertation topic.

Intended learning outcomes

On completion of this unit students should be able to:

  1. Demonstrate a comprehension of key topics in the empirical banking literature;
  2. Demonstrate a critical awareness of the crucial role of banks for the economy;
  3. Describe and critically evaluate the interaction of a bank with borrowers and analyse the effect on loan pricing;
  4. Critically reflect on and discuss the role of the government, regulation, and government interventions into financial systems;
  5. Demonstrate the ability to appropriately deploy microeconometric techniques to answer research questions in banking;
  6. Critically evaluate and appraise current and future directions for research in banking.
  7. Demonstrate a comprehension of the economic thinking required and the methodological skills necessary for furnishing dissertations on research projects in banking.

Teaching details

Teaching takes place in a combination of lectures and smaller group workshops. The 15 hours of lectures will take place in a traditional lecture setting, all efforts will be made to ensure lectures are as engaging and interactive as possible with the active use of student questioning, and student participation in exercises and case studies. The five 1-hour workshops will be drawing extensively on real life examples with a focus on student preparing and presenting material to their peers, who will be given opportunities to provide constructive feedback. Extensive supportive material will be made available via Blackboard.

Assessment Details

Formative assessment

Formative assessment will take on a variety of forms. Ongoing formative assessment of students’ comprehension of the subject will take place during the small group workshops where students will be given the opportunity to present ideas and concepts to the group. As part of the formative assessment, students will be asked to collaborate in self-selected groups in which they present short summaries of academic research papers. This reinforces their understanding of how to sequence research papers to aid their subsequent preparation of the dissertation. In addition, formative assessment includes also the participation of students in group work during the workshops in which they will collaborate and jointly develop a research strategy for an empirical research project that introduces them to the steps of furnishing a research paper (ILO7). For all components of the formative assessment, they will receive verbal feedback from academic leads and there will also be peer to peer feedback on such occasions.

Summative assessment

(1) 30 % Group assignment consisting of an empirical research project. Working in groups of (4-5 students), students are required to demonstrate their ability to analyse an empirical research question in the context of bank market structure and economic outcomes.

Specifically, students will synthesise and combine different concepts such as the resourcing and handling of data for research projects, the deployment and application of microeconometric tests, the presentation of research findings, and the formulation and testing of hypotheses based on the literature introduced in the lectures. They will convey their findings in a report within a given timeframe (i.e., there is a deadline).

This assessment will assess learning outcomes 1, 2, 5 and 6

(2) '70 % Closed book exam (2 hours).

This assessment will assess learning outcomes 1, 2, 3, 4, 5, 6

Reading and References

The core text for this module is Degryse, Kim, and Ongena (2009) Microeconometrics of Banking: Methods, applications, and results. Oxford University Press. The core text is supplemented with references to the academic literature in the slides that will accompany each lecture. The papers in the journals from the reading list are essential reading material. The academic literature will be drawn from the following journals: Quarterly Journal of Economics; American Economic Review; Journal of Finance; Journal of Financial Economics; Review of Financial Studies; Journal of Financial and Quantitative Analysis; Journal of Financial Intermediation; and the Journal of Money, Credit, and Banking. Students are expected to have obtained and read a copy of each chapter and/or paper in the essential reading list prior to each lecture or workshop.

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